Investment Scenario

[Dry Ice]

Note: That is a hypothetical question concerning investment scenarios and one should consult professionals and practice due diligence and serious research before engaging in any type of investment, the answers that might be provided in this thread are purely on an informative basis and do not constitute a professional approach to investment.


Hello everyone,

Supposing a scenario where you would have some cash and would like to invest it beyond a bank saving account; where would you recommend making an investment if considering a relatively liquid environment (mutual fund/stock markets) and what type of return on investment would you consider reasonable over a period of 3 years?

Thoughts appreciated

[Ana]

Originally Posted by Dry Ice

Note: That is a hypothetical question concerning investment scenarios and one should consult professionals and practice due diligence and serious research before engaging in any type of investment, the answers that might be provided in this thread are purely on an informative basis and do not constitute a professional approach to investment.


Hello everyone,

Supposing a scenario where you would have some cash and would like to invest it beyond a bank saving account; where would you recommend making an investment if considering a relatively liquid environment (mutual fund/stock markets) and what type of return on investment would you consider reasonable over a period of 3 years?

Thoughts appreciated

Liquid investments usually return less than illiquid ones. Your apetite for risk is the key factor. 3 years is a considerable amount of time and almost no one can forecast that well. Here's my opinion about the next 3 to 6 months period. The dollar shouldn't depreciate much more than it already has. If your cash is in a non $$ currency, I would buy $$ now and hold onto it for few months(3 - 6). The yield should be good. Otherwise, if your cash is in LB or $$ already, invest in any index (DJIA for example) as an inflation is expected due to the recent Fed cutting back of the prime rate by 0.5%. I believe the Fed will increase the rate again and prices should come back to normal inflation pace.

Depending on what the money is. You mentioned you need liquid investments which tells me that you're risk apetite is not high but you're still trying to make few bucks here and there. My advice: If this is your entire capital that you want to invest..... don't! I do strongly suggest that you keep enough liquidity on you in a low yield bank account that would last you 6 to 8 months just in case somehow you lose your job(assuming you have one?) and you need some funds to lean back on until you get back into the job market. There was an article about this same subject in the wsj couple of months back. Point is, your investments can lose value and you can lose your job. Worst case scenario, you have neither!

[Dry Ice]

Hello Ana, my personal risk tolerance is 5 to 10% in loss.

I was thinking more of a mutual fund than actually going alone in the stock market in order to protect myself, to some extent, from a loss that would go above 10%.

The illiquid investments might be bonds or real estate if I'm not mistaken? However the former is a long period with relatively low returns and in the latter, I personally don't have much experience. With those two illiquid examples, one would assume that the risk is lower, however you mentioned that liquid investments = less risk, could you please further develop on that?

Thanks for the sound advice on the need to keep a safety net, that is recommendable for everyone; if I wanted to summarize your input, you're basically recommending a forex move in the US Dollar, what about mutual funds in emerging markets such as the BRIC or other Latin American/Asian markets if someone is looking got a target 15% total return over 3 years?

Appreciating your input.

[Venom]

equities all the way.... i made 50% return in 6 months by investing in the Doha Securities market....

[Dry Ice]

Originally Posted by Venom

equities all the way.... i made 50% return in 6 months by investing in the Doha Securities market....

Which you could have lost as easily looking at the YoYo effect of Arab Gulf markets and their emotionallly driven movements while compared to developed markets such as North America and Europe, the past 24 months are a clear indicator

As you would know, the Doha market went down around 4000 points between 2005 & 2006, a whopping 35% in loss.

[Venom]

Originally Posted by Dry Ice

Which you could have lost as easily looking at the YoYo effect of Arab Gulf markets and their emotionallly driven movements while compared to developed markets such as North America and Europe, the past 24 months are a clear indicator

As you would know, the Doha market went down around 4000 points between 2005 & 2006, a whopping 35% in loss.

but when u invest in the right time and in the right stocks, things change....today the index is in the 8500 range

[Dry Ice]

Originally Posted by Venom

but when u invest in the right time and in the right stocks, things change....today the index is in the 8500 range

But how does an individual investor know when is the right time and what are the right stocks, here is the whole issue

This market, while attractive, is highly volatile; how do you deal with it?

[Venom]

Originally Posted by Dry Ice

But how does an individual investor know when is the right time and what are the right stocks, here is the whole issue

This market, while attractive, is highly volatile; how do you deal with it?

this is the the job of asset management firms...

the market is highly volatile yes....but akeed u dont keep ur eggs in one basket, and keep on checking the fundamentals, this way u dont go blind ...for example the banking sector in Doha is the best performing one....

for example commercial bank reached around 80 in feb/march...today it is 140

[Dry Ice]

Obviously the keywords here are fundamental and technical analysis. Fundamental for the company itself (business, financial results, industry/sector, etc..) and technical as for the stock price and its history.

What concerns me about the Arab Gulf markets is that many investors do not usually rely on sound analysis either fundamental nor technical and they decide to invest based on some kind of "insider" knowledge that is more often a blown-up rumor than actual facts.

[Venom]

Originally Posted by Dry Ice

Obviously the keywords here are fundamental and technical analysis. Fundamental for the company itself (business, financial results, industry/sector, etc..) and technical as for the stock price and its history.

What concerns me about the Arab Gulf markets is that many investors do not usually rely on sound analysis either fundamental nor technical and they decide to invest based on some kind of "insider" knowledge that is more often a blown-up rumor than actual facts.

Yes 100%....but after the correction that happened last year...trust me most investors and mainly asset management firms are relying on the fundamental analysis.....